How Can I Figure What My Auto Payments Will Be at a Certain Percentage?

The amount of your monthly auto loan payment depends on two major factors: the interest rate and the length of the car loan. The interest rate is based on prevailing market conditions and your credit history. The length of the car loan is generally anywhere from three years to seven years. Shorter loans have higher monthly payments but less total interest, while longer loans have lower monthly payments but cause you to pay more interest. Once you select your ideal loan term, you can calculate what your auto loan payment will be at a specific percentage interest.

Instructions

1

Divide the interest rate percentage by 100 to convert it to decimal form. For example, 8 percent becomes 0.08.

2

Divide the interest rate decimal by 12 to calculate the monthly interest rate. In this case, 0.08/12 is 0.0067.

3

Add 1 to the monthly interest rate. In the example, you now have 1.0067.

4

Raise this to the negative power of the number of monthly payments in your term. For example, with a four-year auto loan, you have 48 monthly payments. Therefore, you would calculate 1.0067^-48, which is 0.726.

5

Subtract that answer from 1. For example, 1 minus 0.726 leaves you with 0.274.

6

Multiply the monthly interest rate by the amount of the car loan. For example, if you are borrowing $17,000, multiply that by 0.0067 to get $113.90.

7

Divide the answer from Step 6 by the answer from Step 5 to calculate the monthly auto payment. In this case, $113.90/0.274 is $415.69.